The difference between sales price per unit and variable cost per unit is the:
A) Gross profit from sales.
B) Gross margin per unit.
C) Fixed cost per unit.
D) Margin of safety per unit.
E) Contribution margin per unit.

Question

Quizplus · Accepted Answer

The difference between sales price per unit and variable cost per unit is known as the contribution margin per unit. This represents the amount available to cover fixed costs and contribute to the company's profit. Option A is incorrect because gross profit from sales involves subtracting both variable and fixed costs from sales revenue. Option B is related to gross profit but is not entirely accurate in this context. Option C is not relevant to this equation as it refers to a separate cost category. Option D pertains to the level of sales needed to cover fixed costs and is not related to the difference between sales price and variable cost per unit.

The Difference Between Sales Price Per Unit and Variable Cost